DC Circuit Errs in Denying Stay of Carbon Rule, So What’s Next?

As most following the controversial carbon rule know, last Thursday the DC Circuit denied a request from 27 states and dozens of private parties to stay, or freeze, the rule until the court has a chance to rule on its legal merits. The decision was not altogether that surprising, given the makeup of the DC Circuit and the seemingly boundless deference given to federal agencies to regulate the environment. Nevertheless, the carbon rule is a model case for a stay to be issued, and the case law cited by the DC Circuit to support their decision (Winter v. NRDC) has no applicability to the situation in this case.

Beyond the case for a stay, states challenging the carbon rule should remain steadfast. The stay decision did not consider the merits of the case against EPA, which are strong as ever. In addition, this decision does not change the fact that the best way to protect the American people from higher electricity prices is for states to make no binding commitments to implement the carbon rule before full legal resolution.

The case for a legal injunction

In Winter, NRDC claimed that certain naval training exercises deemed critical to national security were harmful to protected marine mammals, and thus required the Navy to cease operations until an Environmental Impact Statement was prepared. A preliminary injunction was granted and affirmed by the Ninth Circuit. The Supreme Court was asked to decide whether the Ninth Circuit erred in their decision.

In reversing the Ninth Circuit decision, the Supreme Court held that irreparable harm must be likely, not just probable. They also found the public interest clearly weighed in favor of the Navy’s interest in effective, realistic training of its sailors. In short, the Navy’s interest in protecting the U.S. outweighed the questionable harm claimed by the NRDC to the marine habitat.

There’s no denying Winter stands for a more stringent standard in order to grant an injunction. Do the 27 states and dozens of private companies challenging the regulation meet that standard? Can the EPA claim an equivalent public interest in maintaining the carbon rule as the Navy does in conducting critical national security training exercises? Let’s take them in turn.

First, do the petitioners – 27 states! – meet the requirement for showing a likelihood of irreparable harm if the rule is not stayed?

Yes, on several fronts. As we’ve written about before, the carbon rule’s unprecedented scope and breadth in regulating energy markets traditionally controlled by the states requires several legal and regulatory changes at the state level. This, in turn, requires tremendous state resources. Numerous statements from those in charge of these changes at the state level verify this claim. Even preparing the state plans that identify and propose these changes poses a monumental task. Without a stay, this planning process would have to begin immediately.

This is where the EPA went out of its way to minimize the burden required of states in 2016. EPA issued the final carbon rule, accompanying guidance documents, and court briefings, all assuring the court that no significant action is needed by states in 2016. The reason was that they were now offering a two-year extension to states who merely laid out their intent to consider the rule and how they would comply. Voila! No imminent or irreparable harm.

Well, not quite. Providing reliable, affordable power across the country requires significant planning by utilities. In many cases, the planning windows are anywhere from 7-10 years. Shutting down a coal plant that provides the most reliable, affordable power on the grid and replacing it with new natural gas plants (that often aren’t built) and renewable sources (that aren’t always available when you need them) is a major challenge. So it’s not surprising that EPA’s restructuring of state energy regulation has set in motion Integrated Resource Plans by utilities that will shut down coal plants in response to the carbon rule. This will mean more expensive and less reliable power available to consumers.

As we learned from the mercury rule, more than 40 gigawatts of generation capacity was closed as a result of the rule before the Supreme Court ruled on the lawsuit concerning the rule. Once resource plans get approved by state public utility commissions there’s no turning back. This is the immediate and irreparable harm that is certain to occur in response to the carbon rule. In fact, we already see these plans being submitted by utilities across the country. EPA likely even relied on this irreparable harm happening, given their experience with the mercury rule.

Second, does the EPA’s interest in maintaining the carbon rule match the Navy’s interest in maintaining national security?

According to the Obama Administration, the driving force behind the rule is climate change. Yet using EPA’s own climate model, the rule will yield an imperceptible change in sea level (0.15 cm) and global temperature (0.019 Celsius) by 2100. Surely we can tolerate delaying those gains one year to potentially save States, the energy industry, and the American people from a constitutionally suspect regulation, right?

Ok, so climate change doesn’t tilt the scales in favor of EPA. What about all the health benefits claimed by the rule? Ninety percent of these are attributable to other regulations that limit ozone and particulate matter and effectively all of the benefits rely on the extremely speculative social cost of carbon, which uses a time horizon out to 2300 to guesstimate damages from each ton of CO2 emitted in a particular year.

Lacking any real benefits to rely on, the Administration and its climate alarmist allies are left with symbolism. Literally. [EPA officials] have consistently argued that the Clean Power Plan is primarily about showing the international community that it is serious about limiting carbon dioxide emissions. The carbon rule was explicitly used as a down-payment in the Paris treaty negotiations and is widely acknowledged as President Obama’s climate legacy. Even according to the IPCC and its climate models, delaying action one or two years will have a de minimus impact. Yet, this did not deter the DC Circuit from voting in favor of the government.

Conclusion

It is sad but true that in 2016, symbolic action on climate change is now an equivalent public interest to the Navy maintaining our national security. We can only hope the same panel that is set to hear the underlying legal challenge in June looks at climate science instead of the all-too-common hysteria associated with the climate change subject, and the perceived need for immediate action without any regard to the impact it will have on American families today. Ultimately, states challenging the carbon rule should remain steadfast and avoid making binding commitments before full legal resolution.